The International Monetary Fund (IMF) has projected in a statement issued last week Friday on the completion of the organisation’s mission to Nigeria recently, that the real Gross Domestic Product (GDP) of Nigeria will contract by 3.25 per cent in 2020.
According to the statement, the IMF noted that the Nigerian economy was heavily impacted negatively by the COVID-19 global pandemic.
The IMF said the pandemic-related lockdown put pressure on the productivity of the economy, leading to “a large output contraction and increased unemployment” as supply shortages pushed up headline inflation to a 30-month high.
It also said the decline in oil prices, Nigeria’s main source of foreign earnings, and sharp capital outflows significantly increased balance of payments (BOP) pressures.
According to the IMF, these challenges, coupled with the economy already experiencing falling per capita income and double-digit inflation, there was no way Nigeria could escape a recession, which it slipped into in the third quarter of this year due to back-to-back decline in the GDP.
Nevertheless, the IMF expressed confidence that Nigeria will experience economic recovery next year, “with subdued growth of 1.50 per cent and output recovering to its pre-pandemic level only in 2022.
Explaining the reason behind this, the IMF said the “Nigerian authorities have undertaken commendable and timely measures to counter the pandemic’s impact on lives and livelihoods.”
It lauded the adoption of a revised budget in July by the federal government, especially the removal subsidies on petrol and electricity, which it said “were largely benefiting better-off households.”
“But more needs to be done. Major policy adjustments embracing broad market and exchange rate reforms are needed to address recurrent BOP pressures and raise the medium-term growth path.
“A durable solution to Nigeria’s recurrent BOP problems requires recalibrating exchange rate policies to reduce BOP risks, instil market confidence and facilitate private sector planning,” the statement said.
The virtual mission, held from October 30 to November 17, 2020, and had the IMF staff team led by Ms Jesmin Rahman.